Global Markets and Technologies for Photovoltaic Systems

You won’t be finding it in your local bookstore–the purchase price is $4,850, although you can get bite sized chunks at a much lower price. The report has actually been in the post-production process for some months, now and I felt it useful to sit down and read what I had written.

If the caveats I put in the report are included, it stands up pretty well. The photovoltaic industry has been in a dramatic state of turmoil, and I was a little concerned that my report would have been out of date on the date of publication–something I included in the report.

My short summary of the contents would probably be “The global market for photovoltaics will see five years of strong growth, but that growth will be profitless for almost all involved in the industry.” One thesis I advance is that it’s time for the rest of the logistical chain in PV to work as hard at lowering prices as module makers and polysilicon producers have over the past few years. There is still low-hanging fruit in shortening and lowering the cost of installation, permitting and some elements of the balance of systems.

Here’s what BCC chose to write about the report:

Global revenues from solar cells and modules totaled nearly $38.7 billion in 2011 and should decline to $28.6 billion in 2012. Total revenues are expected to reach $78.1 billion in 2017 after increasing at a five-year compound annual growth rate (CAGR) of 22.3%.

Europe holds the largest share of the market and should increase from nearly $16.7 billion in 2012 to $35.1 billion in 2017, a CAGR of 16.1%.

Asia is expected to increase from nearly $8 billion in 2012 to $27 billion in 2017, a CAGR of 27.6%.

Modern PV technology dates back to the 1950s and the advent of the space program in the 1960s, but the concerted effort to develop this technology for industry and consumer use began during the oil embargoes of the 1970s. However, the eventual stabilization of oil prices had a dampening effect on investment, tax credits and government funding for research and development.

Companies in the PV business have focused on reaching grid parity—where electricity generated by solar power is equal to or below the cost of electricity from competing sources—as a way to broaden the scope of PV. Nations and individual states began to offer serious incentives such as tariffs and tax credits for solar customers. Consequently, we were interested in looking at this industry once again to chart its potential.

Since 1978, the installed cost of solar electricity has charted a downward path strongly reminiscent of declines in the cost/performance ratios found for computer memory and MIPS (million instructions per second, a common metric for performance in the computer industry). From $5/kwh in 1978, the cost of electricity generated by solar power has dropped to $0.20/kwh in 2010. A simple extension of this curve would bring the cost of electricity delivered by solar sources to parity with other generating sources by 2015. Although few believe the performance of solar power improvements can match the dramatic improvements in computer technology, it has only to continue for three more years to make an impact on the marketplace. A lot is riding on the short-term performance of solar power and many are keenly interested in the results.

11 responses to “Global Markets and Technologies for Photovoltaic Systems”

I think the price of installed solar has to go way below parity before it really makes an impact. There has to be some sort of power reserve/backup for the time sun does not shine. Thinking that existing coal or gas will be used as backup with current prices is an illusion. When you cut down the number of hours a power plant runs, the price of power will rise.

Then there are grid issues (witness Germany) that will also add to costs that the consumers will ultimately pay. I’d say around 2020-25 solar will be truly competitive in sunny areas.

That’s been the conventional wisdom for about a decade–between 2020 and 2025 to drive it. When I ran the numbers it looked like it will come early. But a lot of smart men and women would vote with you.

I have followed the German Energiewende and there has been some unexpected outcomes. For example, power companies do not want to build new coal and gas plants any more because the right-of-way rule for renewables means that whenever there is sun and wind, fossil plants will have to shut down. This means financial losses. However, Germany must have 100% backup for sun and wind. Vattenfall (energy company) plans to shut down a pump storage facility in Germany because the demand is too erratic and unpredictable. The cost of running a backup generation network is only now emerging but we all know consumers will have to foot the bill.

One thing globally is that when renewables make an impact, this will affect fossil fuel prices. Like cheap shale gas lowered the price of coal in the US. When demand of fossil fuels goes down their prices will go down, too.

Piggybacking on harrywr2’s comment about 20S to 20N, there is a longstanding push for small scale energy systems in developing countries (which obviously don’t all fall into this latitude range, but some do). As a sort of “progressive” agenda, it seems (to me) to be partially motivated by 1) a way to avoid involving corrupt national governments in electricity systems 2) a way to avoid building a grid, for cost reasons 3) a “small is beautiful” sentimentality (& others)? There are obvious implications for storage if grids are small and local. However, is this a net positive or negative for the PV market? I don’t know.

Hi BillC, I don’t think it’s off-at all. Rural Electrification Programs using solar have been around since the mid-80s. I think ENERSOL was the first non-profit to use solar in Latin America. They’ve taken off over the last decade, especially in India, which has spent $527 million on helping subsidize REPs to villages that don’t stand a chance of being hooked up to the grid any time soon. The costs per mile for building transmission lines vary widely, from $200,000 to $1.4 million per mile, so it’s clear you can build a lot of ground mounted solar arrays with the same money. In parts of the world where villages are more than a couple of miles away from transmission lines, it certainly makes economic sense to provide the shortcut.

About three million people have been provided electricity via solar through REPs. Drop in the bucket, both in terms of the people needing electricity and the number of solar modules employed to do so. But because it’s working, it may accelerate quickly.

A significant portion of India is controlled by Naxalites. The naxalites are pretty much against corporations and the central government. If the Indian government were to extend the grid into naxalite controlled districts the power would just be confiscated as ‘the property of the people’ which would result in either an unlimited subsidy or the necessity to induce blackouts in order to control the costs of the subsidy. Already in India grid losses (electricity that can’t be accounted for..some of which is transmission line losses…some of which is bypassing the meter) are 20+%.

Providing solar panels to Naxilite controlled districts is a way to demonstrate the generosity of the central government while at the same time controlling the subsidy costs.

As an aside, a significant portion of India’s coal resource is in naxalite controlled districts and the naxalites are less then enthusiastic about letting coal india ‘steal it’. Hence…it stays in the ground.

A scheme similar to how land was made available to the railroad developers who pushed our US transcontinental railroad west from Joplin, Mo – free square miles for every X number of miles of track – might do the job, but in most developed countries the reserve is not available or if available not convenient to markets. But in undeveloped countries?

Labor intensive (ie. smaller scale) implementations could make more sense in an economy where labor is still economical. Steam rail worked in China long after it became impractical in the rest of the world because China had coal and the significant labor demands on both right of way and equipment maintenance imposed by steam power were not troublesome to the Chinese who had plenty of labor.

It could be that a power technology, solar, for example that could work well in some levels of the world economy could be folly to implement in the first world.

one last thing, Thomas, when a study is sold for $4,800, is it by contract, and if so is it subscribed in advance? How many copies of the full report are subscribed? Hoping this isn’t too proprietary.

Thank you for your continued publication of what appears on this thoughtful blog.

Marty,
there is another thing which might burden the railroad analogy, the frontier. We had a frontier with land taken from the locals at no real cost to us – free land. It was also desirable to new immigrants.

I had been thinking of implementation in Africa, but maybe there is no desirable land there not already in possession of the ultimate landowners.

This doesn’t obviate the possibility that solar farms might make far more sense in the undeveloped world.

Jferguson, please forgive me for not replying to your questions earlier. The price is paid upon contract–and I think you can pay by credit card, whether for the entire report or the relevant sections you purchase. I think you get one PDF copy–and I must confess I don’t know what the restrictions are regarding dissemination within an organization.